Law:

Section:

Section 7 of the Wealth-tax Act, 1957 – Valuation of assets – Others – Assessment years 1957-58 to 1959-60 – Business of assessee-company was connected with liquor and drinks – Value of goodwill was being shown at over Rs. 5 lakhs since its inception which remained static until introduction of wealth-tax when assessee took a real look at valuation of goodwill and reduced it to Rs. 1 – WTO, however, took value at Rs. 5 lakhs – Having regard to factors, namely, introduction of prohibition in country gradually, restrictions on trade of assessee, partition of India and establishment of a similar company in Pakistan and also fact that originally company was located only at Bombay and it was only gradually that it had extended business to other parts of India, Tribunal held that there was nothing unnatural in assessee's conduct in writing off major portion of goodwill and it could not be considered as an attempt to evade tax – Whether if Tribunal had come to conclusion that no goodwill of assessee remained on relevant valuation dates, having regard to human conduct, it could not be said that Tribunal's finding was not a possible finding or a perverse one based on no evidence – Held, yes FACTS The business of the assessee-company was connected with liquor and drinks. The net wealth of the assessee-company had been determined by the WTO under section 7(2)(a), on the global basis by deducting from the total value of the assets as appearing on the balance sheets as on the relevant dates the total liabilities. The WTO found that the company had written off the goodwill shown at a figure of about Rs. 5 lakhs in the earlier years almost the entire sum leaving a token balance of Re. 1 only. Goodwill had always been shown on the assets side of the balance-sheet previously. It was claimed by the company that goodwill being a wasting asset and since prohibition and gradual restriction on trading was being imposed and a separate company under the same name had been established in Pakistan, the goodwill of the company had no value. However, looking to the profits of the company, the WTO held that value of goodwill at Rs. 5 lakhs was not excessive and that the idea of writing off…

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